Property buyers pay millions for Melbourne vacant land and homes in need of a bulldozer

Some buyers look for the right house, but for many in some of Melbourne’s blue-chip suburbs, it is less about the house and more about applying the long-held real estate adage location, location, location.

Prices for tight, vacant blocks of land, rundown properties ripe for demolition and even family homes in perfect condition without a heritage overlay (meaning they can be demolished) are soaring.

Kay and Burton’s Jamie Mi said overseas buyers loved the idea of potentially building something perfect themselves because it was difficult to find the right property in the top end.

Even if there was a contemporary property on the site, they would still ask whether it could demolished or if there were any restrictions, she said. Some local families were also very open to building in Toorak.

In nearby Monomeath Avenue, a vacant 658-square metre block with planning permit for two Nicholas Day-designed townhouses is expected to fetch more than $2.8 million at auction.

A rare vacant block of land at 62 Elliott Avenue, Balwyn, is up for auction. Photo: Jellis Craig

Demand for homes with development potential had “grown dramatically”, with more local and international property developers in the market, RT Edgar director Mark Wridgway said.

A three-bedroom home headed for the bulldozer at 12 St Georges Road in Toorak rocketed $1.82 million above its reserve last November, and is believed to have set a Toorak land value record of nearly $10,400 per square metre.

Jellis Craig auctioneer Andrew Luke said demolishing and building a new home might be more economical than renovating a period home.

A house with development potential doubled the marketplace of potential buyers, with families hunting for homes and developers and builders looking for land to make a profit, he said.

At the bottom end of the market there is an abundant amount of land on the city’s outer edges, with Wallan offering the cheapest at a median of $248 per square metre, Domain Group data shows.

Craigieburn had the most number of land sales over the December quarter, while Doreen in the north-east recorded the strongest annual growth for land prices at 18.5 per cent.

The median price for land in Pakenham also soared 17.3 per cent over the year.

Some western suburbs had weaker values and growth because there was more land, Domain Group chief economist Andrew Wilson said, adding that affordability and the first home owners grant would continue to drive demand for house and land packages.